ACCT20100 Chapter Notes - Chapter 7: Perpetual Inventory, Gross Profit, Income Statement
Document Summary
Chapter 7: reporting and interpreting cost of goods sold and inventory. Separation of responsibilities for inventory accounting and physical handling of inventory. Storage of inventory in a manner that protects it from theft and damage. Comparing perpetual records to periodic physical counts of inventory. If cost of goods sold is understated, income before taxes would be. Overstated in the current year because this value would be carried over to the next period, the following effect would occur: Because cost of goods sold was overstated, income before taxes would be understated in the next year. Two periods and the balance sheet for at least one period *: another example: If ending inventory is understated, assets on the balance sheet will be understated due to the understatement of the ending inventory balance. On the income statement, cost of goods sold will be overstated and. Gross profit will be understated, which will result in an understatement of net income.
